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Serving Northern St. Louis County, Minnesota

Council OK’s eight-percent levy increase

Drained reserves and higher costs put city in tight spot going into 2020

Marshall Helmberger
Posted 12/19/19

TOWER—After a few fits and starts, the city council here, on Monday, approved a general fund levy increase of eight percent for next year as city officials grappled with the implications of …

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Council OK’s eight-percent levy increase

Drained reserves and higher costs put city in tight spot going into 2020

Posted

TOWER—After a few fits and starts, the city council here, on Monday, approved a general fund levy increase of eight percent for next year as city officials grappled with the implications of financial decisions made by the previous administration. The final levy increase was a modest reduction from the ten-percent preliminary levy increase the council set back in September.
City council members indicated reluctance to approve the tax increase, but noted they are dealing with a host of items that are fueling higher spending, without the reserve funds that were once available to the city to help pay for them. In addition, the city will need to repay at least $50,000 in emergency funds provided by the League of Minnesota Cities to cover the city’s bills in 2019. The city obtained $250,000 from the League back in October as it struggled to pay the cost of a trail project around the harbor and other expenses. The city’s previous administration had largely stripped the city’s financial reserves, leaving Tower forced to rely on irregular sources of funds to operate.
Those problems aren’t likely to go away in 2020. Clerk-treasurer Victoria Ranua advised the council that cash flow is going to be “very tight” this year and that the city will need to do everything possible to keep a lid on spending, including limiting new projects.
Adding to the cash flow concern is the need to pay the remaining cost of purchasing a new ambulance, which is now expected to arrive early next year. The city still owes $164,994 on the vehicle after paying $65,000 towards the purchase of the rig in 2019. The city currently has $121,409 remaining in its township subsidy account, leaving the city to cover $43,342 of the purchase price from remaining city funds. That amount could still drop if other townships provide their second 2019 subsidy payment before the ambulance arrives.
While the city’s ambulance has long been a source of income and cash flow, that has changed dramatically since the adoption of a paid staffing model in early 2018, which has sent the cost of running the ambulance service far higher, without sufficient additional revenues to maintain the roughly $100,000 annual margins that the ambulance service enjoyed up until 2018.
Budget data presented by Ranua showed the ambulance service had cleared just $4,460 in 2018, while the year-to-date budget for 2019 showed a $130,701 deficit. Ranua noted that the current figure was misleading in part because a portion of the ambulance cost was paid in 2019. She said she would prefer to see larger capital purchases pulled out of the operating budget, since they can distort the numbers. Also impacting the 2019 figure is a roughly $80,000 accounting adjustment that transferred revenue booked this year to the 2018 books. Correcting for those factors, the ambulance service is likely to finish the year close to break-even. There’s little indication of improvement next year, as the preliminary 2020 ambulance budget shows a deficit of $135,463, including the remaining cost of ambulance purchase.
The 2020 budget does not include any funds for training of paramedics or any push towards developing a part-time ALS service. However, at the insistence of Ambulance Supervisor Steve Altenburg, it still includes $6,500 to pay for restaurant meals, snacks, and groceries for department members, an expense item that Ranua had originally zeroed out in the budget. The budget also includes $11,240 to pay for the rental and maintenance of ambulance staff quarters.
The budget that Ranua presented to the council on Monday included a total general fund levy of $402,072, but the council reduced that amount to $394,761, an increase of eight percent over the $365,520 the city levied in 2019. As usual, the total levy included an additional $5,000 assessment for the Tower Economic Development Authority.
Ranua said she would have to spend more time with the budget in order to bring the spending plan in line with the reduced resources, but the council authorized the 2020 spending plan with that understanding. “The budget’s a guideline,” said Kringstad, who said the city will need to find additional savings over the course of the year.
Among the other spending pressures the city is facing is a nearly $100,000 anticipated bill for engineering and legal costs associated with the plan to replace the city’s main water transmission line. Those costs would likely be reimbursable, however, should the city obtain funding for the line replacement, which is planned as part of a larger project to upgrade the city’s drinking water treatment plant.
The city also continues to face fallout from the 2018 Hoodoo Point campground sewer extension. Ranua added funds to cover an anticipated settlement with Utility Systems of America as final payment for that work. The city has, to date, withheld just over $36,000 over a dispute about sags in a sewer main. Since the city has no more bond proceeds to pay for the final settlement, it will have to come out of existing city revenues. The additional expense forced Ranua to reduce the city’s expected draw from the campground operations, from $60,000 to $45,000 next year.
Other related council action demonstrates the challenges the city will face as it attempts to cut costs in the coming year. With the city facing a major cash flow challenge by late winter or spring, the council approved a two-year contract with its AFSCME employees that includes a six-percent pay increase in the first year and a four-percent increase the following year.
Ranua said the higher pay is intended to bring the city more in line with wage rates for similar positions in other cities on the Iron Range. AFSCME representatives had brought an analysis to the city council during a recent closed session, which suggested that the city of Tower’s pay scale was about 25-percent less than other nearby communities. The city will be losing its maintenance supervisor Tom Gorsma early next year after he accepted a position with Breitung Township. In her memo on the budget, Ranua stated that such staff changes disrupt the functioning of a small city like Tower.
Meanwhile, the council voted 3-1, with council member Sheldon Majerle voting no, to authorize payment of double time for ambulance staff hours worked on six holidays, including Memorial Day, Fourth of July, Labor Day, Thanksgiving, Christmas, and New Year’s.
In her memo on the issue, Ranua noted that she could find no authorization for the holiday pay, despite the repeated claims of Supervisor Altenburg to the contrary. The city has already been paying the holiday pay throughout the year on Altenburg’s insistence although there is no evidence the council ever authorized the spending as Altenburg claims.
While Majerle said he supported the higher pay for workers, he said he was frustrated by Altenburg’s lack of candor. “Our employees should be telling us the truth and not lying to us all the time,” he said. Majerle had investigated the issue after the council tabled the question at their Dec. 9 meeting. “I could find no policy, no council approval, and no list of holidays it even applies to,” said Majerle. “Someone gave an order to pay these people without authorization.”
But Ranua argued that the pay premium was a separate issue from the question of previous authorization. “We shouldn’t be putting employees in the crossfire,” she said.
Council member Rachel Beldo motioned to approve the holiday pay, but council member Mary Shedd offered an amendment to revisit the issue by the Fourth of July and conduct a broader analysis of the ambulance service in the meantime.
“There’s pay, there’s on call, there’s mattresses, there’s staff quarters, there’s training, and then there are deficits that we are trying to deal with,” said Shedd. “We are piecemeal trying to understand the issues about the ambulance and emergency services that keep coming before us. There’s a lot of debate and disagreement about everything from on-call to housing, to time paid, to training. I find it difficult as a councilor to keep up and make good decisions without seeing the big picture.”
Shedd said she’d like to see a comprehensive management review by some kind of outside expert to better understand the range of issues the council is trying to address with the ambulance service. “I just feel like we’re spinning our wheels.”
In the end, Beldo accepted Shedd’s amendment although it remains to be seen if the council follows through on her request for a management review.
In other action, the council:
Approved Altenburg’s request to send at least seven members of the ambulance staff to attend the annual EMS conference in Duluth from Jan. 22-26. Ranua estimated the cost at about $600 per member, including registration fees, hotels, and meals, for a total of about $4,200 for seven participants. Some councilors questioned whether the conference was actually important as continuing education but, in the end, they approved the expenditure.
 Approved setting aside $21,671 to cover half of the remaining cash needs for the ambulance purchase. The township ambulance subsidy account will cover approximately $121,000, leaving the city still on the hook for $43,342, so Monday’s set aside will reduce that remaining cash need to $21,671.
 Took no immediate action on a proposal to apply for Blandin broadband funds to help pay for an upgrade to the city’s website. Shedd said the city council did establish a task force for that purpose earlier this year and that she would like to convene it in January in order to determine a work plan for a new website. John Bassing, representing the local broadband committee, told the council that about $9,000 of the Blandin grant remains to be allocated, with a deadline of June. He noted that the Tower Economic Development Authority had already submitted their own request for funds to create a new TEDA website.
 Approved hiring Como Oil to install gas lines neededfor a new a gas range at the city’s civic center.
 Approved a proposal by Ranua to switch the city from a monthly payroll schedule to twice monthly.
 Approved having Beldo and Shedd attend the League of Minnesota Cities training on Jan. 24 and 25. The budget impact is $275 per attendee, plus possible mileage and hotel expense.

tower city council, levy